A Queensland-based lender has issued a statement clarifying its home loan referral agreement with a brokerage after ASIC announced its concerns about the relationship.
In an ASX trading update last week, Wide Bay Australia confirmed its home loan referral agreement with finance broker group FTS, but stressed that it is “an arms-length relationship” and Wide Bay has no operational involvement in FTS’s financial planning business.
“All loans referred by FTS to Wide Bay are, and always have been, fully assessed and approved or declined on their merits,” Wide Bay managing director Martin Barrett said.
“No home loans referred to Wide Bay by FTS have required recovery action and none of Wide Bay’s current repossession actions relate to FTS clients,” Mr Barrett said.
The statement comes after ASIC announced last month that the Queensland-based lender would improve its responsible lending practices following concerns voiced about the way the group was assessing its customers’ suitability for home loans.
The outcome was part of ASIC's wider focus on the lending industry's compliance with responsible lending laws.
ASIC's concerns about Wide Bay followed a restructure of its customers' home loans undertaken in 2013 which was initiated by a third-party broker, FTS Finance Brokers Pty Ltd, which is owned by FTS Securities Pty Ltd (FTS).
ASIC was concerned that Wide Bay relied too heavily on limited information provided by FTS Finance Brokers rather than checking directly with the borrower about their requirements and objectives. Wide Bay will be updating its application forms to ensure they capture relevant information about a borrower's requirements and objectives, as well as improving processes for when insufficient or inconsistent information is provided.
ASIC acknowledged the co-operation of Wide Bay in resolving this issue.
Wide Bay general manager Charlton Nevis commented that the lender works continuously and cooperatively with ASIC.
“The processes that ensure a loan is suitable for a borrower are critical and Wide Bay continuously reviews and improves its evaluation regime,” he said.
Wide Bay holds a 25 per cent shareholding in FTS, which was written down to nil in June 2013.
Wide Bay does not actively refer clients to FTS, and does not have a financial planning arm.